Hedging in Denmark and Southern Sweden (SE4)

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Hedging in Denmark and Southern Sweden (SE4)► This document presents data for hedging done by means of

cleared Electricity Price Area Differential (EPAD) contracts and Contracts for Difference (CfDs).

► In the appendix, you’ll find a list of the terms and acronyms used in this document.

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Jan. 20, 2014 Anders Plejdrup Houmøller 1

Copyright Houmoller Consulting ©Jan. 20, 2014 Anders Plejdrup Houmøller 2

SE1

SE2

SE3

SE4DK1DK2

►Sweden is split into the four price zones SE1, SE2, SE3 and SE4.

►Denmark is split into the two price zones DK1 and DK2.

The price zones


EPADs/CfDs for Southern Sweden (SE4)Hedging for 2014

► December 23rd, 2013 the Open Interests for the EPADs/CfDs were:

Product MW TWhSYMALYR-14 267 2.34SYMALJAN-14 65 0.05SYMALFEB-14 48 0.03SYMALMAR-14 20 0.015SYMALAPR-14 11 0.008SYMALQ1-14 414 0.89SYMALQ2-14 284 0.62SYMALQ3-14 268 0.59SYMALQ4-14 267 0.59

► By summing the TWhs, we get an upper limit for the hedging for the year 2014 done by means of cleared EPADs/CfDs by the end of 2013. The upper limit is 5.14 TWh

► In 2013, consumption in SE4 was about 24 TWh.3

Source: Nasdaq OMX Commodities


EPADs/CfDs for Western DenmarkHedging for 2014


Product MW TWhSYARHYR-14 261 2.29SYARHJAN-14 140 0.10SYARHFEB-14 60 0.04SYARHMAR-14 0 0.00SYARHQ1-14 448 0.97SYARHQ2-14 302 0.66SYARHQ3-14 251 0.55SYARHQ4-14 261 0.58


► In 2012, the net consumption in Western Denmark was 20.0 TWh.

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CfDs for Eastern DenmarkHedging for 2014


Product MW TWhSYCHPYR-14 159 1.39SYCHPJAN-14 74 0.06SYCHPFEB-14 40 0.03SYCHPMAR-14 0 0.00SYCHPQ1-14 230 0.50SYCHPQ2-14 244 0.53SYCHPQ3-14 174 0.38SYCHPQ4-14 159 0.35


► In 2012, the net consumption in Eastern Denmark was 13.4 TWh.

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CfDs for Southern Sweden (SE4)Hedging for 2012

►December 28th, 2011 the Open Interests for the CfDs were: Product MW TWhSYMALYR-12 262 2.30SYMALQ1-12 554 1.21SYMALJAN-12 109 0.08SYMALFEB-12 5 0.003SYMALQ2-12 292 0.64SYMALQ3-12 258 0.57SYMALQ4-12 267 0.59

► By summing the TWhs, we get an upper limit for the hedging for the year 2012 done by means of cleared CfDs by the end of 2011. This upper limit is

5.39 TWh► In 2012, the consumption in SE4 was about 25 TWh.

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CfDs for Western DenmarkHedging for 2012

►December 28th, 2011 the Open Interests for the CfDs were: Product MW TWhSYARHYR-12 396 3.48SYARHQ1-12 778 1.70SYARHJAN-12 46 0.03SYARHFEB-12 16 0.01SYARHQ2-12 446 0.97SYARHQ3-12 341 0.75SYARHQ4-12 396 0.87


7.82 TWh► In 2012, the net consumption in Western Denmark was

20.0 TWh.7




►December 28th, 2011 the Open Interests for the CfDs were: Product MW TWhSYCHPYR-12 115 1.01SYCHPQ1-12 134 0.29SYCHPJAN-12 40 0.03SYCHPFEB-12 20 0.01SYCHPQ2-12 125 0.27SYCHPQ3-12 113 0.25SYCHPQ4-12 120 0.27


2.13 TWh► In 2012, the net consumption in Eastern Denmark was

13.4 TWh.8



CfDs for Western DenmarkHedging for 2011

►December 29th, 2010 the Open Interests for the CfDs were: Product MW TWhSYARHYR-11 559 4.90SYARHQ1-11 1123 2.42SYARHJAN-11 67 0.05SYARHFEB-11 59 0.04SYARHQ2-11 598 1.31SYARHQ3-11 489 1.08SYARHQ4-11 544 1.20


11.0 TWh► In 2011, the net consumption in Western Denmark was

20.2 TWh.9




►December 29th, 2010 the Open Interests for the CfDs were: Product MW TWhSYCHPYR-11 206 1.80SYCHPQ1-11 357 0.77SYCHPJAN-11 35 0.03SYCHPFEB-11 30 0.02SYCHPQ2-11 215 0.47SYCHPQ3-11 157 0.35SYCHPQ4-11 206 0.46


3.9 TWh► In 2011, the net consumption in Eastern Denmark was

13.6 TWh.10


Copyright Houmoller Consulting ©Jan. 20, 2014 11

AppendixTerminology and acronyms

Anders Plejdrup Houmøller


Terminology and acronyms – 1As used in this presentation

► CfD Contract for Difference. The former name for a financial contract hedging against the risk there is a difference between the System Price and the spot price of a given Baltic-Nordic price zone.The terminology was changed 30 September 2013: now the name is EPAD contract (Electricity Price Area Differential).Example: the underlying reference for the EPAD/CfD for DK1 is this difference

PriceDK1 - (System Price).► DK1 and DK2 The price zones of Western and Eastern Denmark

respectively. Please refer to the picture at slide no. 2.► Double auction A calculation method whereby an exchange’s price is

set by using the exchange’s supply curve and the exchange’s demand curve. See the PowerPoint presentation “Maximizing the economic value of market coupling and spot trading”.

► EPAD contract Electricity Price Area Differential contract. See CfD.► Net consumption The electricity consumption excl. grid losses.► Nordic and Nordic area In this document, this refers to the four

countries Denmark, Finland, Norway and Sweden.12



► Open Interest For a given financial product, this is the net hedging done by means of the product.A financial product’s turn-over will normally be bigger than the product’s Open Interest, as traders may move in and out of positions in financial contracts.Note: For a given financial product, the Open Interest only measures the product’s cleared volume (i.e. the volume of contracts where the contracts’ settlements are done by a clearing house).In addition to this volume, there may be bilateral contracts made between parties who have chosen to do without clearing. For each such contract, the contract’s two parties will themselves take care of the settlement. However, these contracts do not contribute to the market’s transparency: the contracts’ prices and volumes are not public known.

► Price zone A geographical area, within which the players can trade electrical energy day-ahead without considering grid bottlenecks. 13



► SE4 The price zone of Southern Sweden. Please refer to the picture at slide no. 2.

► Spot bid A purchase bid or a sales offer submitted to a spot exchange.

► Spot exchange In this document, a spot exchange is an electricity exchange where Electrical energy is traded day-ahead. The day-ahead prices are calculated by means of double

auction.► Spot price A price calculated by a spot exchange. Either by a

calculation performed by the spot exchange itself, or by a calculation performed by a body, to which the calculation has been outsourced.

► System Price A virtual price. It’s the theoretical, common spot price we would have in the Nordic area, if there were no grid bottlenecks in the area covered by the four countries.

14Jan. 20, 2014 Anders Plejdrup Houmøller


Thank you for your attention!

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Anders Plejdrup HoumøllerHoumoller ConsultingTel. +45 28 11 23 00

[email protected] houmollerconsulting.dk

Documents

Hedging in Denmark and Southern Sweden (SE4)